FILE PHOTO: Wal-Mart CEO Doug McMillon addresses a business leader panel discussion as part of the U.S.-Africa Business Forum in Washington August 5, 2014. REUTERS/Jonathan Ernst/File Photo
THERE’S never a good time for a highly regarded chief executive officer (CEO) to step down, but Doug McMillon’s (pic) surprise decision to retire from Walmart Inc looks particularly inopportune.
The world’s biggest retailer said last Friday that McMillon would leave the top job on Jan 31; he’ll be succeeded by John Furner, who runs Walmart’s US business.
It’s refreshing to see a CEO quit before his sell-by date, rather than try to cling to power. And Furner, already running Walmart’s most powerful division, is a safe pair of hands.
But the transition comes as Walmart faces a raft of challenges: Many US consumers are in a precarious position; tariffs are upending global trade; the grocery market is as competitive as ever and Walmart must ensure it doesn’t repeat its early eCommerce mistakes when it comes to the rise of artificial intelligence (AI) shopping.
Under McMillon, who became CEO in 2014, Walmart successfully navigated a dangerous period for the big box sector, which faced hot competition from online retailers – particularly Amazon.com Inc.
To compete, he strengthened Walmart’s eCommerce arm. But crucially, he also realised that to thrive, the company needed a solid core US retail business.
He doubled down on serving customers well in Walmart stores, raising wages for staff to help elevate the experience.
That enabled it to win over more affluent customers as inflation spiked in 2022.
And he recognised the potential of Sam’s Club to prevent Costco Wholesale Corp from chipping away at too much of Walmart’s market share.
A company lifer, McMillon understood what wasn’t working too.
He exited peripheral assets, such as selling a majority stake in Walmart’s British arm, Asda.
More recently, he has added Walmart Plus, an Amazon Prime-like membership programme and a retail media business, whereby suppliers and those selling on its marketplace buy advertising, boosting profitability.
And he has put AI is at the heart of his strategy for the future.
There have been some stumbles. A big one was the mountain of unsold inventory that piled up three years ago.
However, Walmart recovered from this more quickly than rival Target Corp, which faced the same issue.
The result is sales and profits that have risen under McMillon’s tenure, while the company’s share price has quadrupled.
Little wonder the stock fell as much as 3.6% last Friday.
Walmart shares quadrupled under McMillon
New CEO John Furner must continue the progress. The outgoing CEO, who is 59, leaves Walmart firing on all cylinders – but that’s not always a comfortable place for another executive to step into.
Furner, 51, is very much in the McMillon mold.
Another Walmart lifer, he joined the company as an hourly associate in 1993.
Given that the United States has been the cornerstone of Walmart’s success – and that McMillon likely handpicked him for the top job – expect Furner to follow his predecessor’s strategy, particularly when it comes to technology.
Still, he will have to maintain the run of good performance while also putting his own stamp on the company.
That’s no mean feat, especially as the transition comes at a particularly tricky juncture.
Many of Walmart’s core customers have been pressured by tariff-driven inflation, as well as the government shutdown.
As they have to pay more for the things they need, they may opt to buy less, particularly when it comes to discretionary yet profitable items such as clothing and home goods.
Meanwhile, other threats loom. McMillon was able to establish Walmart as a challenger to Amazon, but the battle isn’t over.
In August, the online giant said it would massively expand its grocery-delivery business, a move that could hit Walmart where it hurts.
Then there’s AI, which is poised to upend shopping much the same way the Internet did two decades ago.
McMillon has already positioned Walmart in the next technological commerce race, announcing last month that shoppers could buy its products within OpenAI’s ChatGPT.
It’s a good first step. To keep the momentum going, Furner must avoid falling behind as Walmart did in the early days of eCommerce.
Amid the technological advancement, there is another, more folksy threat that Walmart can’t afford to ignore: Aldi, the German discount retailer is expanding across America.
It already has about 2,500 stores and is aiming for 3,200 by 2028. Furner cannot lose sight of this muscular competitor even as he eyes the AI horizon.
Having run the US business, Furner should have a handle on all these issues.
But McMillion, even as he transformed Walmart, understood the old adage, “retail is detail.” As Walmart prepares for yet another reinvention, his successor must do the same. — Bloomberg
Andrea Felsted is a Bloomberg Opinion columnist covering consumer goods and the retail industry. The views expressed here are the writer’s own.
